UPDATE 1-GSK hands back failed muscular dystrophy drug to Prosensa

LONDON, Jan 13 (Reuters) - GlaxoSmithKline has
handed back rights to an experimental drug for Duchenne muscular
dystrophy to U.S.-listed Dutch biotech firm Prosensa
after it failed last year in a critical clinical trial.

Both companies said on Monday that Prosensa would now have
full and unencumbered rights to drisapersen, as well as other
compounds at an earlier stage of development. The move marks the
termination of a 2009 collaboration deal between the two firms.

Hopes for the drug slumped last September when it did not
show a statistically significant improvement in the distance
that patients could walk in six minutes compared with a placebo
in a final-stage Phase III test run by GSK.

Currently, there is no approved drug to alter the course of
Duchenne muscular dystrophy (DMD) - a rare muscle-wasting
genetic disease affecting boys that puts most of them in
wheelchairs by the age of 12 and leads to early death.

Shares in Prosensa, which raised nearly $90 million in an
initial public offering on Nasdaq in June, fell 17.5 percent to
$4.63 on the news GSK had thrown in the towel. They were priced
at $13 in the IPO and hit a high of $34.55 in August.

Despite the latest setback, Prosensa's chief executive Hans
Schikan said he had not given up on drisapersen, adding the
company was analysing results from various studies of the drug.

"Based on the data we've seen so far we feel it absolutely
justifies a discussion with experts, with patient advocacy
groups and most importantly with regulators to define what the
next steps could be, including a potential regulatory path
forward," he said in a telephone interview from the J.P. Morgan
healthcare conference in San Francisco.

Schikan will present an update on the company's prospects at
the meeting on Thursday, including a high-level update on
various analyses that have been carried out so far.

He declined to specify the likely next step, but industry
analysts at Leerink said the fact GSK had handed back rights
suggested that pooling and sub-group analyses had failed to
provide strong enough evidence to justify a filing for approval.

There had been speculation that younger DMD patients might
benefit more from the drug or that combining results from
different clinical trials might show a statistically significant
drisapersen effect.

FUNDING UNTIL 2015

Leerink estimated that Prosensa ended 2013 with around $98
million in cash, which depending on its new development plans
for drisapersen would likely be enough to fund operations into
mid- or late-2015.

Last summer GSK and Prosensa had been seen as ahead of the
pack in making a drug for DMD - a belief underscored by it
having been awarded a "breakthrough therapy" designation by the
U.S. Food and Drug Administration.

In the event, the key trial results in September dashed
those hopes, dealing a major blow to Prosensa but causing
relatively little damage at its much larger partner GSK.

Overall GSK's research laboratories have done well in the
past 12 months, with new drug approvals in HIV, cancer and
respiratory disease.

But Britain's biggest drugmaker has been less successful in
higher risk areas. In addition to the DMD setback it has also
reported disappointing results with a new kind of therapeutic
cancer vaccine and a novel heart medicine.